Scripps Signs $300-Million Agreement : Medicine: Under deal, research institute will give right of first refusal to Sandoz Pharmaceuticals.

In one of the largest deals of its kind, Sandoz Pharmaceuticals Corp. has agreed to give La Jolla-based Scripps Research Institute $300 million in return for right of first refusal to Scripps' future medical discoveries.

According to terms of the deal announced Thursday by Sandoz, the giant, New Jersey-based drug company will provide $300 million in research funding over a 10-year period beginning in 1997. Scripps will use the money to fund ongoing basic research, and will undertake joint research projects with Sandoz.

In effect, Sandoz paid for the "right to look over our shoulder" in Scripps' world-renowned research laboratories, said William Beers, Scripps Research Institute senior vice president.

The Sandoz agreement takes effect after a similar, previous agreement with New Jersey-based Johnson & Johnson expires in 1996. Johnson & Johnson, a pharmaceutical and consumer products company, now holds right of first refusal on Scripps' basic research that could lead to the development of diagnostic and therapeutic drugs for humans and animals.

Scripps previously arranged similar agreements with other companies, including Pittsburgh-based PPG Industries.

Several nonprofit research institutions have allied themselves with for-profit companies in recent years because "Congress in the 1980s said that nonprofit operations (receiving federal funds) who want to patent their findings must demonstrate that they are converting those (discoveries) to products that are benefiting (taxpayers) who have been paying for them," Beers said.

Some nonprofits opted to create for-profit research and development companies to carry products through required federal testing and into the marketplace. Others, like Scripps, have licensed their discoveries to for-profit companies in return for research funding.

Scripps opted to license its research findings because, while it enjoys a worldwide reputation for excellence in basic research, "we don't know much about that (product development) process," Beers said.

Scripps prefers to "get hooked up with a company that's successful in developing products," Beers said. "Would we be more effective if we went by ourselves? Probably not . . . and you certainly wouldn't be able to generate the early cash that a deal like this allows you to generate."

Sandoz allied itself with Scripps because the organizations share an interest in the fields of immunology, central nervous system disorders and cardiovascular diseases, said Timothy G. Rothwell, president and chief executive of Sandoz.

For Scripps, the agreement brings a source of funds needed to pay for increasingly expensive and complex basic research. The benefit to Sandoz is the wealth of scientific knowledge inside Scripps' research complex.

The Scripps Research Institute, with an annual budget of $122 million, has 1,800 professional and support staff. The research institute is allied with the Scripps Institution of Medicine and Science, a La Jolla-based parent organization, and the Scripps Institutions of Medicine and Science, a health-care and clinical research organization with about 3,300 employees. The Scripps organization also includes the Scripps Memorial Hospitals group.

Sandoz's Scripps' agreement is one of several strategic partnerships arranged by the company in recent years. In 1991, Sandoz Pharmaceuticals Corp., the U.S. subsidiary of Basel, Switzerland-based Sandoz Pharma Ltd., agreed to invest up to $100 million over 10 years in oncology research at Boston's Dana-Farber Cancer Institute.